Factors that Determine Aggressive Tax Avoidance Among Listed Commercial Banks in Nigeria from 2014 To 2023: Evidence from Panel Regression Analysis
DOI:
https://doi.org/10.61143/umyu-jafr.8(1)2025.010Keywords:
Aggressive tax avoidance, effective tax rate, firm size, leverage, profitability, capital intensityAbstract
The objective of this study is to examine the factors that determine the aggressive tax avoidance among listed commercial banks in Nigeria. The selected factors include firm size, leverage, profitability and capital intensity, while tax avoidance was measured by Effective Tax Rate (ETR). The study used Political cost theory and Political power theory to underpin the established relationships in this study. Exploratory research design was adopted and secondary data was gathered from published annual reports of the selected banks for the period of 10 years (2014-2023). The population of the study are the 14 listed commercial banks as at 2025, while filtering approach was used to sample 13 banks that are listed throughout the period of the study. The collected data was analyzed using descriptive, correlation and panel regression analysis with the help of STATA 14.0. The study found that firm size has negative effect on aggressive tax avoidance by having positive impact on ETR; leverage and profitability have significant positive effect on tax avoidance by having negative effect on ETR, while capital intensity was insignificant. In view of these findings, the study concluded that tax avoidance behavior among Nigerian commercial banks is not universally derived by a particular inherent characteristic as every attribute has a way it affects the strategic behavior. It is therefore recommended that FIRS should leverage the accountability of larger banks by promoting compliance frameworks and transparent reporting requirement for such banks through mandatory disclosure rules of cross-border transactions and tax planning arrangements. There is also need for policymakers to strengthen thin capitalization rules so as to restrict the excessive interest deductions that leveraged firms are exploiting. Furthermore, tax authorities should tighten the scrutiny for the most profitable banks in the Nigerian financial industry for a potential aggressive tax planning scheme as they have incentive and resource to exploit the tax loopholes
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